Analysts at Rabobank explained that the EUR/USD is the third best performing G10 currency over the past week having notched up 2.5% vs. the USD in the last five days.
"The EUR is too new and has too recent a history of near political facture to be worthy of the term safe haven. However, the Eurozone boasts a huge current account surplus (around EUR37 bln sa in Mar) which can mean the EUR displays quasi safe haven qualities from time to time. Going into the end of last year the market was short EURs on the back of concerns about populism and weak growth in the region. Not only has the result of the French Presidential election brought relief for the markets but Eurozone economic growth has also exceeded market estimates this year. By contrast, US data has been at best mixed of late while its political backdrop has become more uncertain.
Having already met our long-standing target of EUR/USD1.10, EUR/USD is on course for hitting our 12 mth forecast at 1.12. We have been reluctant to notch these expectations higher given expectations of a Fed rate hike in June and possible guidance about a reduction of the balance sheet. That said, the chances of a hawkish Fed would appear to diminish with political scandal. This suggests clear upside risk to our EUR/USD forecasts this year."